Aqueous coating compositions which may be applied by conventional coating techniques as well as by electrodeposition are provided by reacting an epoxy-containing organic material with a compound containing a mercaptan group and at least one group hydrolyzable to a carboxyl group. Examples of such hydrolyzable groups include ester groups, amide groups and nitrile groups. The resultant product is then hydrolyzed and solubilized using hydrolyzing agents such as aqueous alkali metal hydroxides and aqueous solutions of various amines.